９ Work Group on Solidarity Socio-Economy – Alliance 21 Workshop on International Regulations May 2005 Sara Anderson Institute of Policy studies Washington D.C. USA Transnational Corporations CONTENTS I. INTRODUCTION: GLOBAL CORPORATE POWER AND CITIZEN RESPONSES II. GOVERNMENT RESPONSES AT THE INTERNATIONAL LEVEL A. International Labor Organization B. OECD Guidelines for Multinational Enterprises C. United Nations Global Compact D. UN Human Rights Commission Norms for Transnational Corporations III. PROPOSALS A. Long-term Goal: Binding International Standards B. Medium-Term Strategy 1. Push for UN Support for Norms for Business 2. UN Activities to Lay the Groundwork 3. International Court for Corporate Criminals I. INTRODUCTION: GLOBAL CORPORATE POWER AND CITIZEN RESPONSES Most of what we eat, drink, wear, drive, and watch is the product of firms that are now global in their operations. The power of these transnational corporations over our lives, our planet, and our democratic institutions has never been greater. And it is growing. According to the United Nations, there were 7,000 transnational corporations in 1970. Today, there are about 64,000, with 870,000 affiliates around the world. 1
Transcript
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Work Group on Solidarity Socio-Economy – Alliance 21
Workshop on International Regulations
May 2005
Sara Anderson
Institute of Policy studies
Washington D.C.
USA
Transnational Corporations
CONTENTS
I. INTRODUCTION: GLOBAL CORPORATE POWER AND CITIZEN RESPONSES
II. GOVERNMENT RESPONSES AT THE INTERNATIONAL LEVEL
A. International Labor Organization
B. OECD Guidelines for Multinational Enterprises
C. United Nations Global Compact
D. UN Human Rights Commission Norms for Transnational Corporations
III. PROPOSALS
A. Long-term Goal: Binding International Standards
B. Medium-Term Strategy
1. Push for UN Support for Norms for Business
2. UN Activities to Lay the Groundwork
3. International Court for Corporate Criminals
I. INTRODUCTION: GLOBAL CORPORATE POWER AND CITIZEN
RESPONSES
Most of what we eat, drink, wear, drive, and watch is the product of firms that
are now global in their operations. The power of these transnational
corporations over our lives, our planet, and our democratic institutions has
never been greater. And it is growing.
According to the United Nations, there were 7,000 transnational corporations in
1970. Today, there are about 64,000, with 870,000 affiliates around the world.
1
[i] Of these, the largest 200 firms are the dominant engines of the global
economy. One way to measure the power of global corporations is to compare
the rate of growth in their sales and assets to the growth in the world economy
as a whole. Between 1983 and 2002, the top 200 firms' sales and assets
outpaced world economic growth. At the same time, their economic expansion
far exceeded the increase in their workforces. In 2002, the combined sales of
the Top 200 were the equivalent of 28.1% of world GDP, while their employees
comprised only 0.82% of the world's workforce. [ii]
Is big necessarily bad? Some point out that mammoth corporations are more
efficient because they can take advantage of economies of scale. Others argue
that the development of new medicines and technologies requires massive
investment in research that only large firms can afford. However, concern
about the growing economic power of corporations is justified at a time when
environmental and other public interest regulations, as well as government
oversight to control corporate behavior, are being weakened in most countries
of the world. This has increased the possibilities for giant corporations to
undermine democracy through excessive political influence and put their goal of
increased profits above social goals, such as high quality jobs and a clean
environment.
Unfortunately, most governments around the world are pursuing policies to
further enhance corporate power. Existing and proposed trade agreements
increase the ability of corporations to move their products, money and factories
around the globe more quickly and with less impediment from regulations.
These policies are also supported by the World Bank and International Monetary
Fund.
Yet a powerful backlash has been gaining strength. In recent years, Bolivians
used people power to drive out foreign corporate water privatizers that had
hiked prices beyond reach. Consumers and small farmers around the globe
forced Monsanto to drop plans to market GMO wheat. Lawyers, working with
Burmese plaintiffs, won a historic settlement against Unocal for forced labor.
Environmentalists pressured Home Depot into adopting a policy on sustainable
logging. Millions have promoted positive business models by buying fair trade
products. Unions have worked together across borders to pressure
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transnationals into respecting the right to organize. Students have pressured
their universities to buy only sweatshop-free goods. In the
United States, a national campaign is taking shape that will unite a broad swath
of the U.S. public and international allies to pressure the world's largest
corporation - Wal-Mart - to end its union-busting and other destructive practices.
These are only a few examples of how people are working at the local,
national and global level to challenge corporate power. In order to be most
relevant to the Workshop on International Regulations, the bulk of this
paper will focus narrowly on efforts at the international level to influence
corporate behavior through public institutions. It will begin with the
oldest, the International Labor Organization Conventions, and end with the
most recent development --the Norms for Business developed by a
sub-commission of the UN Human Rights Commission, which many NGOs have
hailed as a positive step towards binding international standards. The
author recognizes that more positive actions to check corporate power are
also vital at the local and national levels but they are beyond the scope of
this paper.
II. GOVERNMENT RESPONSES AT THE INTERNATIONAL LEVEL
A. ILO
The International Labor Organization sets standards for working conditions
globally. Although it targets governments rather than corporations, these
standards set out internationally recognized norms in many areas that affect
corporate behavior. Since its founding in 1919, the ILO has adopted 185
standards in the form of conventions that are subject to ratification by
member states. Of these, the ILO has identified the following as most
fundamental: the rights to freedom of association and collective bargaining
and bans on forced labor, child labor, and discrimination in the workplace.
Not all governments have ratified even these core standards, but those that
3
are members of the ILO are nevertheless obliged to observe them.[iii]
As a standard-setting body, the ILO has had tremendous impact in
strengthening the legal protections for workers around the globe. There are
some important omissions in the standards. For example, there is no ILO
convention related to sub-contracting, a practice used increasingly by
corporations to limit their liability for rights violations. In general,
however, the most pressing labor rights problems today are not the result of
weaknesses in the ILO standards or even of a lack of good national
legislation. The problem is enforcement. While the ILO monitors government
(not corporate) compliance with global standards, its authority is limited
by the fact that it holds no power to impose sanctions. In some cases, ILO
reports and monitoring have created a sufficient "shame factor" to result in
concrete improvements. But there continues to be rampant abuse of basic
labor rights in rich and poor countries, including those that have ratified
many of the core standards and incorporated them into national law.
The limits on the ILO's authority are perhaps most evident in its failure to
remedy one of the most egregious violations in the world: the widespread
use of forced labor in Burma. In 2000, an estimated 800,000 Burmese were
being forced to work as porters for the army or as workers on construction
or agriculture projects for no or very little pay. In response, the ILO
took the unprecedented step of approving a resolution that denounced Burma's
military regime for inflicting a "contemporary form of slavery" and calling
on ILO member states to consider imposing economic sanctions on the country
unless it resolved the problem. This was the strongest measure available
under the ILO charter. Unfortunately, it had little impact. The Burmese
government responded by claiming that it was officially banning slave labor,
but five years later, the problem remains. According to the ILO, forced
labor continues to be a common practice on infrastructure projects. In
fact, human rights groups report more than 50 prison camps that include
women and young girls across the country.[iv]
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B. OECD Guidelines for Multinational Enterprises
The OECD Guidelines for Multinational Enterprises represent the only
comprehensive code for corporate conduct that is endorsed by a large number
of governments. They cover multinational enterprises operating in or from
the 30 OECD countries, plus 8 non-members, which means that they cover most
of the large transnational corporations in the world.[v] The areas covered
are fairly extensive and include employment and industrial relations,
environment, bribery, consumer interests, science and technology,
competition, and taxation.[vi]
The OECD Guidelines explicitly state that they are non-regulatory and purely
voluntary. However, they do provide a channel for raising complaints with
governments. Each member state has considerable flexibility in establishing
its own entity responsible for investigating and reporting on compliance,
called a "National Contact Point" (NCP). According to OECD Watch, while a
handful of countries have created NCPs that represent union and other
stakeholders, the vast majority are made up solely by one government
department. In the United States, it is the Office of Investment Affairs in
the State Department, which lacks expertise in labor or environmental
matters. As a result, support for the guidelines varies greatly, depending
on the make-up of the NCP and the national government's political will.
A summary of cases compiled by the Trade Union Advisory Committee to the
OECD clearly reflects the unevenness of implementation. Since 2000, trade
unions have raised more than 50 complaints, half of which were still
unresolved at the end of September 2004.[vii] The TUAC report includes some
examples in which the NCPs played a positive role. For example, in 2002,
the Czech NCP helped pressure a subsidiary of the German company Bosch to
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resolve a labor dispute. Workers had complained that the local management
had used physical force and other means to prevent the workers from
exercising their rights to organize. The Czech NCP raised the matter with
the German government and held four meetings that eventually led to
consensus between the workers and management.
On the other hand, the TUAC report includes numerous examples in which the
NCPs were either unresponsive or ineffective in handling complaints
regarding violations of the OECD guidelines. The U.S. NCP appears to have
been particularly unhelpful. For example, the report notes that the AFL-CIO
wrote to the U.S. NCP in May 2001 to complain about U.S. corporations with
ties to the military government of Burma, which the ILO had accused of using
forced labor. According to the report, the AFL-CIO did not even receive a
reply. Other problems include the reluctance of the NCPs to deal with cases
regarding subcontractors of multinational enterprises or with cases in which
the enterprises do not have a direct investment in the host country, but
rather are involved in trade or service work. There is considerable
disagreement over the interpretation of the Guidelines regarding these two
points. Nevertheless, the TUAC argues that the Guidelines should be seen as
one of numerous channels for resolving complaints of labor rights
violations.
A number of environmental and other groups have also filed complaints under
the OECD Guidelines, including Friends of the Earth, Greenpeace, Attac
Sweden, and the Clean Clothes Campaign. Like TUAC, they have also reported
mixed experiences and views. Friends of the Earth, for example, has pointed
out a number of weaknesses, but also notes that the procedure for filing
complaints under the guidelines is not as expensive or complicated as filing
a lawsuit and thus can give individuals or groups with limited means a
chance at recourse.[viii]
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C. UN Global Compact
There is considerable skepticism about the ability of the United Nations to
play a strong role in controlling transnational corporations. In part, this
is due to the painful history of efforts begun in the 1970s to formulate a
code of conduct. After more than a decade of work, the initiative fell
apart in the 1980s due to opposition from the Reagan administration and also
the Japanese and some European governments.[ix] A further blow came in
1993
when the UN Centre on Transnational Corporations, which had conducted
important research on corporate activity, was reduced to a small unit of
UNCTAD and tasked with promoting foreign investment.
In 2000, the United Nations rather timidly eased back into the area of
corporate social responsibility with an initiative called the Global
Compact. The Compact seeks to create a partnership between the UN and
transnational corporations to promote 10 principles in the areas of human
rights, labor, the environment, and anti-corruption.[x] The project's
official goal is to "advance responsible corporate citizenship so that
business can be part of the solution to the challenges of globalization."
It is run by a small Global Compact Office, with support from six UN
agencies: the <http://www.unhchr.ch> Office of the High Commissioner for
Human Rights; the <http://www.unep.org> United Nations Environment
Programme; the <http://www.ilo.org> International Labour Organization; the
<http://www.undp.org> United Nations Development Programme; the
<http://www.unido.org> United Nations Industrial Development Organization;
and the <http://www.unodc.org> United Nations Office on Drugs and Crime.
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Hundreds of companies have agreed to participate in the Global Compact. In
addition, some international business associations, union bodies, and
nongovernmental organizations are included as participants, with the stated
goal that the Compact would provide the opportunity for them to engage with
the corporations through four mechanisms: dialogue, learning, local
networks and project partnerships.
The Global Compact has been widely criticized as nothing more than a ploy by
transnational corporations to use their partnership with the UN for PR
purposes (dubbed "blue-washing" by some, in a reference to the color of the
UN flag). To participate, firms simply must state that they support the 10
principles and report annually on how they are supporting them.
According to Kenny Bruno, of Earthrights International, "The Compact allows
companies to say they are committed to UN principles, but they do not have
to follow them. There is no monitoring, no evaluation and no
accountability. No criticism is allowed, only good news."[xi] In addition,
Bruno and other critics argue that the Global Compact sets a tone throughout
the UN system whereby corporate partnership is considered legitimate and
desirable in almost any circumstance. It has also been used by the
corporate participants to argue that stronger corporate accountability
initiatives (e.g., the draft Norms described below) are unnecessary.[xii]
The International Confederation of Free Trade Unions (ICFTU), the umbrella
body for most labor federations in the world, is a participant in the Global
Compact, but concedes that trade union experience with the initiative has
been mixed. In a 2004 report, the ICFTU explained that a number of national
trade unions had complained about the behavior of some of the corporate
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Global Compact members and wanted the Compact to kick out serious
offenders
and require that others address problems with the appropriate parties.
However, the ICFTU cautioned against transforming the initiative into "yet
another management-oriented mechanistic corporate social responsibility
initiative that would 'certify'companies through what could only be a
dubious 'monitoring' process."[xiii]
The ICFTU sees the Compact primarily as a channel for dialogue, and points
out that some international union organizations have found it a useful means
of engaging high-level corporate officials. The report cites examples of
how Global Union Federations (union bodies that represent various sectors at
the international level) have made use of the Global Compact in the process
of forging Global Framework Agreements with a few corporations. These
agreements commit the firm to upholding a set of standards in all of its
operations around the world. At the same time, the ICFTU laments that
"throughout the activities of the Compact, too much attention has been
devoted to promoting the corporate social responsibility industry while not
enough attention has been spent on genuine dialogue."[xiv]
D. UN Human Rights Norms on the Responsibilities of Transnational
Corporations
Around the same time that the UN was launching the Global Compact, another
effort to promote greater corporate accountability was getting off the
ground within the UN Sub-Commission on the Promotion and Protection of
Human
Rights. This is a body of independent human rights experts elected from all
regions of the world by the UN Commission on Human Rights. In 1999 the
Sub-Commission began a process of developing a draft corporate code of
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conduct, based on existing international agreements signed by nation states,
including the Universal Declaration of Human Rights, as well as a wide range
of labor, environmental, consumer protection, and anti-corruption
agreements. The Norms are innovative in that they are a comprehensive
interpretation of the responsibilities of corporations under these
international laws.
After four years of work, including consultation with business, union, human
rights and other organizations, the Sub-Commission unanimously approved the
Norms in August 2003.[xv] Approval by the entire 53-nation UN Commission on
Human Rights is the next step.
The substantive provisions of the Norms cover:
* right to equal opportunity and non-discriminatory treatment
* right to security of persons (e.g., businesses shall not engage in
nor benefit from war crimes, genocide, torture, forced labor)
* rights of workers (includes right to a living wage)
* respect for sovereignty and human rights (includes prohibition on
bribery, rights to development including adequate housing and clean water,
and indigenous peoples rights)
* consumer protection (prohibits producing or marketing harmful
products)
* environmental protection (e.g., businesses shall respect the
precautionary principle and be responsible for the environmental and health
10
impacts of all of their activities)
The Norms further would oblige corporations to incorporate the norms not
only in their own practices but also in their contracts or other dealings
with suppliers. Another significant point is that they state that
corporations "shall be subject to periodic monitoring and verification by
UN, other international and national mechanisms already in existence or yet
to be created, regarding application of the norms." They would also oblige
corporations to compensate any people or communities adversely affected by
violations of the norms.
There are differing interpretations of the Norms' potential legal effect.
Most of the NGOs engaged in the issue, including Amnesty International,
Oxfam, Human Rights Watch, Christian Aid, and others, consider them an
important step in what would be a long road towards binding international
standards. Amnesty International claims that the Norms could over time
evolve to become part of customary international law, especially if national
and international tribunals and courts begin to reference and apply them and
if advocates and corporations use them. [xvi] <> According to Human Rights
Watch, the Norms and the accompanying commentary "could provide the
conceptual basis for a binding international instrument on corporate
responsibility."[xvii]
By contrast, statements by business groups give the impression that the
Norms would result overnight in UN thugs hauling off CEOs for minor
offenses. For example, the Confederation of British Industry lobbied its
government to oppose adoption of the Norms by arguing that they are
"ill-judged and unnecessary," would impose "absurdly onerous" report
requirements, and would hurt poor countries by discouraging foreign
investment.[xviii] The International Chamber of Commerce has stated that
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the Norms "clearly seek to move away from the realm of voluntary initiative,
and we see them as conflicting with the approach taken by other parts of the
UN."[xix] The ICC not surprisingly prefers the Global Compact, which it
helped design.
III. PROPOSALS
A. Long Term Goal: Binding International Standards
Nation states will and should remain primarily responsible for regulating
corporate behavior. But national governments are often too weak, too
desperate for foreign investment, or too dependent on corporate campaign
contributions to hold global firms accountable for their crimes. Moreover,
the complexity of many firms' global operations has made it increasingly
difficult for national governments to monitor and address a wide range of
problems, from tax evasion to anti-competitive practices.
Thus, there is a pressing need for stronger mechanisms at the international
level to build a counterweight to corporate power. Trade unions and other
groups have managed to obtain some significant results by using existing
voluntary codes. If nothing else, these codes and standards give legitimacy
to civil society campaigns against corporate abuses. However, gains made
through these mechanisms are often dependent on support from fickle national
governments or firms being particularly sensitive to public pressure.
Thus, while work to strengthen the capacity of national governments and to
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improve and critique existing mechanisms should continue, the long-term goal
should be to develop binding international standards.
International Court for Corporate Crimes
Following the precedent set by the creation of the International Criminal
Court, a similar court should be established for corporations that could
exact real punishment on corporate criminals. Why is it that a dictator now
faces the prospect of being brought before an international tribunal over a
crime such as torture but a CEO who has profited from forced labor does
not? Another important precedent at the international level is the
mechanism for handling investment disputes. Why is it that a private
foreign investor can sue a government in an international tribunal over the
loss of a contract or a new environmental law that reduces their profits,
while residents of a community poisoned by a global company must rely solely
on domestic courts for justice?
Obviously, this vision of an International Court for Corporate Crimes will
not be realized any time soon. There are numerous obstacles to establishing
any type of international enforcement mechanisms. First, there is the
problem of political will. Ideally the court would operate under UN
auspices, but the reality is that the UN is currently a cash-strapped
institution that has been weakened by the sole global superpower's decision
to act unilaterally with regard to Iraq. It is unlikely at this moment that
the UN will take on new roles that would not only further strain resources
but also spark new conflicts with the U.S. government.
Another obstacle is the lack of consensus within global civil society. Some
13
have argued that while international corporate codes and guidelines are
fine, any enforcement mechanism would be manipulated by the richer countries
to undermine the sovereignty of the poorer nations. This argument is not
without merit, as there are countless examples of U.S. bullying of
international institutions. However, I think there is a stronger argument
that the suffering caused by a lack of enforcement authority at the
international level outweighs these concerns. To compare it with a local
context, if a judge in the Southern United States was a racist who only
convicted black men, it wouldn't make sense to eliminate the whole judicial
system, but rather to find ways to safeguard it against such abuses.
The mere threat of international enforcement may also strengthen national
government actions. For example, when a Spanish judge used international
law to accept jurisdiction over a case against former dictator Augusto
Pinochet, the Chilean government charged that this undermined Chile's
national sovereignty. In the end, it was the international pressure that
resulted from the Spanish case that led to Chilean authorities stripping
Pinochet of the immunity he had enjoyed in his home country, opening the
door for a trial there. Without the threat of prosecution under
international law, this would not have happened.
Another argument against international enforcement is that punishing a
corporation for violating international standards will only hurt the workers
employed by that firm. It is certainly possible that a stiff fine could
result in job cuts. But would people really prefer to give corporations
that are known rights violators a free pass, allowing them to continue to
abuse people or the environment? Some might also argue that a judgment
against the corporation might cause it to move to another country, where
workers might be less likely to file complaints. I would argue that this
would be far less likely to happen under uniform binding standards that
apply to all countries than if we continue to have only national-level
regulations. Corporate criminals would have fewer places to hide.
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These points all deserve a great deal more discussion - hence, the need for
a medium-term strategy.
B. Medium-Term Strategy
1. UN Support for the Norms
The UN Commission on Human Rights should support the UN Norms for
Business
by formally adopting them and encouraging all member states to view them as
a benchmark for national legislation.
2. UN Information Activities to Lay the Groundwork
To address concerns over binding international standards, the UN should take
on new areas of work designed to document whether or not national
governments are capable of handling complete responsibility for holding
corporations accountable to the standards laid out in the draft Norms of
Responsibilities for Transnational Corporations. This work could be
conducted by existing UN agencies or by a new UN Organization on Corporate
Accountability, similar to that proposed by the International Forum on
Globalization.[xx] The work would primarily involve information gathering
to help lay the groundwork for binding international standards.
15
Here are a few examples of what such work could include:
Database of corporate crime:
* Maintain comprehensive and accessible public records of regulatory
infractions and civil and criminal prosecutions and convictions for all
corporations with transnational operations.
* Publish a review of efforts to use national laws to hold global
corporations accountable for offenses committed abroad (e.g., the Unocal
case filed in U.S. courts over abuses in Burma). The publication would
cover the opportunities and obstacles associated with such efforts.
Right-to-Know
* Corporations often must report more information about their home
country operations than their overseas operations. For example, in the
United States, environmental groups have succeeded in gaining
"right-to-know" legislation that requires U.S. corporations to make public
detailed information regarding toxic emissions from their U.S. facilities.
However, these firms do not have to report to the U.S. government anything
about their toxic emissions abroad. The UN should publish regular reports
on these gaps and double standards in reporting.
Documenting the Race to the Bottom in Standards:
* Collect information on corporations that move facilities from one
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country to another in response to union organizing drives or increased
public interest regulation.
Anti-Corruption:
* Convene an international panel to recommend national legislation to
limit the political influence of global corporations on government
policymaking, including limits or prohibitions on corporate financial
contributions to political parties and candidates, and spending on campaigns
related to legislation.
* Publish an annual review of the national laws regarding corporate
money in politics in each member state.
In addition to work related to the major provisions of the draft Norms, the
UN should also carry out research designed to address whether there is a
need for an international anti-trust mechanism. Addressing anti-competitive
practices seems to be an area in which national governments are particularly
disadvantaged.
Anti-trust:
* Compile and publicize periodic reports on corporate concentration in
major sectors and the impact of this concentration, naming dominant
corporations
* Produce studies on anti-competitive practices, including
price-fixing, monopolies and monopsonies
* Publish an annual evaluation of each member state's anti-trust laws
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and monitoring and judicial capacity, pointing out areas of weakness.
These are just a handful of ideas on the types of activities that the UN
could carry out that could advance the goal of binding international
standards. While this would be the primary goal, the information generated
could also support citizen and government initiatives at the local and
national level.
3. International Court for Corporate Crimes, Focusing on Most Egregious
In the long-term, we would ideally have a court that would investigate and
impose sanctions related to the entire range of norms adopted by the
sub-commission of the UN Commission on Human Rights. In the medium-term,
it
may be more realistic to follow the precedent of the International Criminal
Court and focus on the most egregious corporate crimes, where there is the
strongest consensus. For example, these could include:
* slave labor and forced labor (ILO Convention No. 29 and No. 105) and
* the worst forms of child labor (ILO convention No. 182, which
addresses the sale and trafficking of children and engaging children in
prostitution and drug trafficking).
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[i] United Nations Conference on Trade and Develoment, World Investment
Report 2003 (United Nations: New York and Geneva, 2003), p. 14.
[ii] Calculated by the author from data in Fortune, July 21, 2003,
International Labor Organization, and World Bank, World Development
Indicators Online. Note: US banks were excluded from assets for 2002,
since they were not included in 1984 surveys.
[iii] For full text of the fundamental rights, see:
